The federal government has a responsibility to balance the need for appropriate business regulation with the potential burden on businesses to comply. While the cost of regulatory reporting is difficult to gauge, it is significant by any estimate. A 2014 Office of Management and Budget Congressional Report calculated the annual cost of federal rules and paperwork at $70.2 to $104.7 billion, while the Small Business Administration (SBA) determined the cost at close to $2 trillion in 2010. The SBA also found that regulations have a disproportionately large impact on small businesses, which spend 36 percent more per employee than larger firms.
Concern about regulatory burden led both Presidents Clinton and Obama to issue executive orders placing reasonable constraints on developing new government regulations. President Clinton’s Executive Order 12866, signed in 1993, requires that agencies submit regulatory actions that have an impact of more than $100 million to the Office of Information and Regulatory Affairs (OIRA) for review. In 2011 President Obama signed Executive Order 13563, which directs agencies to analyze and “modify, streamline, expand, or repeal” existing rules “that may be outmoded, ineffective, insufficient, or excessively burdensome.”
While finding the right level of regulation for any industry is a complex calculation, the effort required for regulatory reporting compliance is to some extent a data problem. Using shared, standardized, and open data, the federal government can make it easier for businesses to collect and submit regulatory data across the board.
Standard Business Reporting (SBR) is a proven approach to reducing businesses’ reporting burden. When fully implemented, SBR will enable companies to realize business efficiencies by automatically compiling reporting requirements through regular business functions. For example, the software used for payroll will automatically calculate tax obligations and package the data in a format that can be submitted directly to the government. SBR creates a standard approach across government that can lead to additional efficiencies, such as enabling companies to provide information only once and allowing multiple government agencies to access the same data. This allows all companies, regardless of size, to streamline their work processes and records management.
On the government side, as business data becomes more comparable, it becomes easier for government regulators to ensure transparency and compliance. Regulatory agencies can compare results across offices, helping keep pace with the complexity of the modern economy and predict risks with greater accuracy. Some legislators are already promoting the benefits of this kind of approach: The proposed Financial Transparency Act would follow many of these same principles for the financial industry.
The President should issue an Executive Order to launch SBR and set an ambitious agenda requesting a roadmap and implementation plan by mid-2017. The roadmap should clearly lay out the quantified benefits to the American economy, major milestones for developing and implementing an SBR program, and key roles and responsibilities inside and outside of government. It must allow flexibility to support an agile approach to prioritization, decision making, and exploring alternative solutions. The implementation plan should include an SBR Council, composed of public and private sector leaders, that will examine best practices from SBR implementation around the world and lean on the software industry to detail lessons learned from previous efforts abroad. The Executive Order should require OIRA to submit a public progress report every six months to ensure transparency and that the government stays on track to roll out SBR standards for businesses to use voluntarily in the near future.
Several countries have already demonstrated the value of SBR. The Netherlands Government pioneered SBR with the adoption of the Nederlandse Taxonomie Project (or Dutch Taxonomy Project) in 2004. The Netherlands has since expanded the project with full SBR as the exclusive channel for corporate income tax filings and continued expansion into other reporting requirements, including pilot programs for educational institutions and housing corporations. Australia has implemented a major transition to SBR in recent years. Brazil and New Zealand are drawing on Australia’s SBR program to develop a project for intra-government reporting, and Singapore is in the process of developing a business case for SBR.
The Australian experience also shows how to implement SBR efficiently and effectively. In Australia’s Standard Business Reporting program, the government is partnering with the software industry to automatically collect information during regular business activities, so companies can simply review the data and submit it to the government without additional data entry or calculations. Australia is now asking businesses to participate voluntarily, and will make SBR mandatory for many government forms beginning in 2018. The Australian government estimates that businesses saved over $1 billion in the 2015-2016 fiscal year and projects nearly $5 billion in cumulative savings by 2017-18.